One of South America’s most important waterways, the Parana River, flows through one of the world’s most important agricultural regions. Starting in Brazil, the Parana stretches some 3,000 miles along the border of Paraguay and into Argentina, making it one of the longest lowland rivers on the planet. Currently, the river is flowing at less than half its historical averages, which is having a dramatic impact on grain transportation across the three countries and threatening hydropower installations, a problem that is particularly concerning for Brazil.
In Argentina, the inland Port of Rosario serves as a critical export hub for grains, with ships able to sail directly to the Atlantic. However, when water levels on the Parana fall too low, ships can’t be fully loaded, which leads to increased cargo costs as grain must be transported to Atlantic ports via truck. The river carries approximately 80% of Argentina’s grain exports. The low water levels on the Parana in 2020 are estimated have cost Argentina’s exporters US$244 million as vessels were unable to operate or load normally, according to the Rosario Stock Exchange. Argentina’s energy and other sectors are also affected. 70% of the compressed natural gas imported by Argentina comes through the waterway, and the automotive and steel industries also rely on it.
The Parana also transports grain coming into Argentina from Paraguay, which is a frequent soybean supplier for the country’s critical crushing operations. Argentina’s Rosario export hub is home to some of the biggest soy-crushing plants in the world. Officials in Paraguay are already reporting that soybean barges have been stranded on the river. In late May, Brazil’s Itaipu hydroelectric plant undertook an 11-day operation to release water from its reservoir to allow the passage of 125,000 metric tons of soybean exports from Paraguay. Both Paraguay and Bolivia use the waterway to transport their exports, including ag products, to major ports.
The Rosario port, as well as other inland ports in northeastern Argentina, are critical for grain exports coming from big Brazilian production states like Goias, Minas Gerais, Sao Paulo, Parana, and Mato Grosso do Sul. These southern farm states move soy and corn barges along what’s known as the Tiete-Parana waterway that links the two rivers through a lock-and-dam system served by riverine ports. All of this is part of the Parana river basin, which covers over 1 million square miles – about the same size as all of Argentina. The basin just experienced the lowest rainfall in 91 years during the 2020/21 rainy season. That has in turn contributed to the area’s hydroelectric reservoirs falling to their lowest levels since 2015.
In an effort to guarantee hydroelectric power, which accounts for about two-thirds of Brazil’s total energy capacity, the country’s national water agency ANA declared a water emergency for the Parana river basin on June 1, which will extend until the end of November. The declaration allows ANA to restrict water use on basin’s rivers and the agency straight-away warned that water transport along the Tiete-Parana waterway will likely be suspended. Transport volumes on the waterway were up +92% at 416,000 metric tons in the first quarter compared to last year, with soy and corn making up a large portion of the cargo, according to the Sao Paulo state waterway department. Transport on the waterway was suspended for 20 months between 2014 and 2015 because of dry weather.
Brazil’s agriculture sector has issued an emergency drought alert for June to September in five states with the severe conditions already hitting crop production. Scientists are also warning of the risk of severe fires in the Amazon rain forest and Pantanal wetlands. The Mines and Energy Ministry forecast dry conditions to persist in coming months, particularly in the Southeast and Center-West regions. (Sources: Dialogo Chino, Argus, OOSKAnews, Reuters)
